The residential housing market has gone through a major boom and bust roller coaster recently. There are many reasons for this. One thing that has become very clear for all to see is the power that quasi-government agencies have had on the market. Whereas banks used to be the primary risk carriers on loans, now entities like Fannie Mae are.
The commercial loan market is a much different beast than the residential version. Here, the majority of lenders are commercial banks providing funding and carrying the risk. At least, that has been the historical situation. The last few decades have seen a move to the government backed loan system seen in residential lending. These agencies were providing over 30 percent of the loans in the market prior to the financial meltdown. Nobody is sure how high the number is now, but it is safe to expect it is much, much higher.
The concept of government lending in the commercial markets is known by the uncreative name "agency lending". There is, however, a major difference from the residential market. In commercial lending, many of these entities actually write the loans themselves and then repackage them for sale on the securities market. This contrasts with the residential market where agencies like Fannie Mae only provide guarantees on the loans. This is a simplification of the process, but gives you the general idea.
Should you look into agency lending when investigating commercial loans these days? Absolutely. It is one area where there is no credit crunch at all. If anything, the opposite is true. The government and Federal Reserve are pumping money into these sectors in an effort to get the economy rolling again. That means there are great deals to be had!
Article Source: http://EzineArticles.com/5472020
